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04/21/88 John G. Phillips Et Al., v. Edward Joyce Et Al.

April 21, 1988





523 N.E.2d 933, 169 Ill. App. 3d 520, 120 Ill. Dec. 22 1988.IL.568

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.


JUSTICE LINN delivered the opinion of the court. JOHNSON and McMORROW, JJ., concur.


Plaintiffs are John G. Phillips, an attorney, and his incorporated law firm, John G. Phillips, Ltd., who filed a contract action against defendants, Edward Joyce and Joyce and Kubasiak, *fn1 seeking an accounting, the imposition of a constructive trust, and restitution of one-half of the fees that defendants obtained in connection with certain class action litigation. Defendants successfully moved to dismiss the complaint on the grounds that the parties' contract violated Disciplinary Rule 2 -- 107 of the Illinois Code of Professional Responsibility, entitled "Division of Fees Among Lawyers." 107 Ill. 2d R. 2 -- 107.

On appeal, Phillips contends that (1) Disciplinary Rule 2 -- 107 does not bar his cause of action since joint fee arrangements among law firms are legally enforceable; (2) Joyce is equitably estopped from denying the enforceability of the contract; and (3) the motion to dismiss the complaint referred to matters outside the pleadings and the trial court accordingly erred in granting the motion.

We reverse and remand.


In 1982, certain individuals hired Phillips to represent them in a lawsuit against a financial brokerage firm. They agreed that Phillips would receive as attorney fees one-third of amounts recovered by settlement or verdict.

On September 27, 1982, Phillips filed an action in State court on behalf of nine individuals and all persons similarly situated, alleging fraud, breach of contract, conversion and conspiracy to defraud. (DeGraff v. Serhant (1982), No. 82 CH 8331.) On the same day, Joyce filed a class action in Federal court, alleging various Federal causes of action as well as State statutory and common law counts. (In re Financial Partners Class Action Litigation (1982), No. 82 C5910.) Both matters arose from the same conduct.

Shortly thereafter, Joyce approached Phillips to suggest that the State court plaintiffs be added to the Federal case and that the two firms work together on the class action. *fn2

According to Phillips, the two orally agreed to work together on the class action as a joint venture, with both firms sharing the work and the fees. Joyce, having represented that he had substantial expertise in securities and commodities class action litigation, was to manage the action and handle pretrial proceedings and discover. Phillips was to undertake the actual trial of the class action because of his substantial trial expertise in State and Federal court.

The parties' agreement further provided that all fees recovered in the class action were to be shared equally by Phillips and Joyce. Phillips' State suit was to be held in abeyance while the Federal court matter was pursued. In furtherance of their agreement, the parties by letter informed all class clients that Phillips and Joyce were jointly representing their interests and that the clients must each sign a new contingent fee agreement. In this letter, which went out over Joyce's signature, the class members were told that Philips and Joyce's "combined efforts" would lead to "the swiftest and most economically satisfactory Conclusion" of the litigation and that "[in] order to further [the parties'] joint representation" of the classes' interests, the class members would have to sign the new fee agreements.

In a letter to Phillips, Joyce represented that he had attempted to contact "[Phillips'] clients in an effort to have them sign a Contingent Fee Agreement engaging both [Phillips'] and [Joyce's] firm jointly." Thereafter, Phillips obtained the signatures of the clients and sent Joyce a copy of the fee contracts.

Phillips' complaint alleges that Joyce began actively pursuing the litigation without dividing work with Phillips, keeping him informed, or even returning his phone calls. He further contends that Joyce prepared and sent to all of the class action clients a new fee agreement which only referred to Joyce as the clients' attorney.

Following the resolution of the Federal class action, Joyce, who had been appointed lead counsel, submitted to the Federal court a petition for attorney fees due to the lawyers involved in the case. Joyce represented that his fees were $956,230 and that Phillips' fees totalled $11,600. In the Federal court, fees were awarded according to the time and expenses each firm had expended.

Phillips then filed his complaint to impress a constructive trust for restitution and for an accounting based on the oral contract he had with Joyce. In response, Joyce filed a motion to dismiss the complaint pursuant to section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615). He asserted that Phillips' complaint failed to state a cause of action because the agreement violated DR 2-107 of the Code of Professional Responsibility (107 Ill. 2d R. 2-107).

The trial court agreed with the position put forth by Joyce and granted the motion to dismiss, with prejudice.



The primary issue on appeal is the application of DR 2-107 to the alleged agreement between Philips and Joyce. Before reaching the substance of this argument, however, we must address a procedural matter. The motion to dismiss was ostensibly brought pursuant to section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615). As such, it attacks the legal and factual sufficiency of the complaint, which, if well pleaded, is admitted as true. Joyce's motion, we believe, asserts an affirmative defense-that the contract is unenforceable because it violates one of the disciplinary rules governing ethical conduct by attorneys. Therefore, the appropriate vehicle for moving to dismiss the action ordinarily would have been section 2-619. (Ill. Rev. Stat. 1985, ch. 110, par. 2-619.) Under that provision, the moving party is required to file supporting affidavits if the grounds for the motion are not apparent on the face of the complaint. The court can hold a limited evidentiary hearing on the matters alleged to affirmatively bar the action.

Joyce argues that the motion is proper under section 2 -- 615, however, because the complaint fails to establish on its face that it was not in violation of the disciplinary rule. Since the court could and did determine that the complaint alleged an agreement that violated DR 2 -- 107 as a matter of ...

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